that is where the action is in the extended hours trading session tonight probably going to set the tone for tomorrow. that will do it for us for "closing bell" tonight. stay with cnbc for "fast money." i'm off to tokyo and i will see you on monday. have a great night. an historic day. >> five years ago today the dow and s&p hit all time closing highs. stocks are not that far away from those historic levels. >> disappointment. >> apple has been the must-own stock. now that it is starting to go the other way it may confuse the october 31. alcoa may put another dent in confidence. >> the number of times this company seems to miss estimate is balanced. your earnings play book

right now. live from the nasdaq market site at new york city's times square. an unhappy anniversary for the bulls today. concerns about earnings and global growth here overblown. should we be happy because the first two earnings seem to be good? >> the one thing not priced is better earnings and a better economic environment. everybody that you talk about is doom and gloom. the economic numbers have not been that great. so certainly some of it is justified. today was a very interesting day because the whole rally from the 2009 lows up until now has been driven by this push and pull between policy and economics and/or fundamentals rchlt today we had a policy response in kmien china and economic fundamentals and today the imf

chose economic fundamentals which to me is a warning sign. it is not a place you want to go in all short. it is a warning sign. >> you were actually right. you were bullish from the 1400 level up to 1474. you are saying lock in profits? >> i would say absolutely lock in profits. i think you need to watch for the risk that the market has changed its stripes a little bit. i'm not all in turning bearish. >> what about a clf? what about a name like that where so much of the conversation has been about iron ore. prices seemed to have bottled but clf hasn't reacted to that. seems like you have time. >> i would rather be in the natural gas space. we will probably talk about that. there has been a structural shift in the coal area.

>> did you catch me rolling my eyes at the joke? by the way let's talk about alcoa because they are saying overcapacity is behind lower prices. they did say a slow down in china but alcoa came in just fine. they are standing by their estimates and their growth for aluminum demand saying it will double between 2010 and 2020. >> alcoa doesn't have a lot of credibility on the long term forecasting side. i don't think earnings season starts until jamie dimon starts it on friday. we will get through what alcoa does. i think the bigger issue is the same issue we had in october of 2007 which is you have the c confluence of growth slowing. they come home to roost when that company has to report the number. it will be a stock picking environment from here on in. >> in terms of guidance at this

point, the china slow down, what yum is saying confirms this notion. the sales growth in the u.s. is the same as china speaks to the slow down in china. it is china that is slowing. we are getting two data points tonight from it. >> i got distracted when he said jamie dimon. that will be an interesting earnings report. yum i sold it too early. i think the story is still generally in tact. it is not surprising that it is slowing a little bit. i think the stock reflects a pretty in tact story. i don't feel like there is that much upside. >> look at the size of relief. we look at shares of alcoa. and this sort of tells you about what the markets were setting up for. they were setting up for the worst. they didn't have any expectation

when it came to alcoa or yum brands. >> the bar is very low going into earnings season. you can get kind of a rip your face off rally. i don't know if it happens. i know that markets tend to go in the directions that hurts the most people and you never get hit by that bus that you see. >> it can work both ways. life sciences said look we have to report earnings. the stock is down 21% today. the market does punish the most amount of people. i think you got to go both ways and that might sound odd for a hockey player. >> in terms of the move we are seeing in alcoa and/or yum brands did the options market predict it? >> first thing i would say it is pessimistic on both names. the first out of the money put in both cases. we saw about 3 1/2 times for

alcoa. there is definitely skepticism there. there wasn't a lot priced in because alcoa doesn't do a heck of a lot on earnings. even when the news is done it is absorbed as meadiocremediocre. i think the size of the move was in line. the sentiment going into most of the earnings seems to be fairly bearish. >> let's bring in the editor of the bloom, boom and doom report. he joins us on the fast line. it is always a pleasure to speak with you. >> my pleasure. >> for our viewers who didn't catch your last interview you said i just want to have a lot of cash because i think within the next six to nine months we can buy just about anything 20% lower than now. do you feel the same way? >> yes. >> so you are sitting with piles of cash around you waiting for the opportunity? >> yes.

yes. >> and so when you take a look around the globe where do you think you will see that opportunity? what are you keeping on your radar at this point? >> well, actually i don't think there is a hurry to buy anything. but if i have to really choose something i might go for a rebound in chinese stocks because the chinese will also bring money off the government changing. and you can easily get 20% or 30% rebound. i personally don't particularly like chinese companies. i would rather play into the hong kong market. basically i think that qe 3 which is unlimited and the bond purchase side and the bailout of countries has been largely discounted by the market and the market has been weakening

technically. so i believe that we may have here quite a serious setback. >> let me ask you something. is there anything that would change your mind, any kind of policy change or does the down 20%, would that be a catalyst for you to use some of that cash you're stock piling? >> actually, i'm just reiterated milton freedman's words. i just don't understand that people like yourself can all the time point out the policies that will save the system. we need less policies, not more policies. >> is there some policy that maybe would be a retraction of qe 3 or all of them? >> i would love to see everywhere in the world certainly in the western world

government expenditures and government bureaucrats being topped by minimum safety percent. that would turn me very bullish. >> i am right there with you. >> on the anniversary of the high in october 2007 i am actually surprised that the dow is still at 13,473 which is almost the same level as we were in 2007 because if i look at the presidential candidates today, if obama gets reelected i think the dow jones should be minus 13,473. if romney gets elected it should be minus 6,000. >> ythe market is up year to

date. as you know october 1987 was not a friendly time. do you see anything underneath the hood that concerns you on that basis? >> yes. i mean, the previous person you interviewed said that everybody faced an increase. that is not what i see in the market place. government bonds, art, high end market, park avenue property market and equity and i think that the asset sizes are vulnerable in my view. >> i remember some time in the last 90 days you mentioned for the first time in a while you

bought european stocks. are you still long european stocks? if not where would you get back into them? >> i am still long because i didn't buy that many. i don't buy them now. i think the lows that we have seen four months ago will be retested. maybe we'll not go down. you see i mentioned that the dial was almost at the previous week. if you look on the other hand i would say the euro at the high end 2007 it was at 4,512. it is 2,472. it is cut by almost half. the ni think there are some opportunities that are emerging but i don't think there is a

great hurry to get into them. >> always a pleasure to speak with you. >> thank you very much. >> these days more gloom and doom than boom. we want to point out a headline. chevron we are watching the shares tick lower. chevron is warning. upstream and down stream revenue will be below the prior quarter. qe 3 significantly lower than qe 2. we are seeing shares down 1.5%. next was one of the most talked about calls of the day. stick around to hear from the analyst who isn't going along with the pack when it comes to apple. a very special report on how big banks are bracing for dooms day and who is best prepared to handle it. much more straight ahead. mike rowe here at a ford dealer with a little q&a for fiona.

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breaking through the 360 level. we could probably see 57 a and 580. over the longer term chart here this is still very much a bull market in apple. >> that was chris barone yesterday talking about apple's pullback. one analyst initiated coverage on a note. >> thanks very much. >> mutual rating, a lot of reasons you cite are reasons we could have said in the iphone 4 s, iphone 3. why the iphone 5 triggers these

arguments? >> another thing specific to that particular device what we are seeing is penetration to 50% and next near it will be closer to 70%. that means growth will be reliant on faster replacement or the shares. we don't think they will be gaining much market share and subsidy prices make it hard. we are going to be focused on is for the next leg of growth apple needs to penetrate the emerging markets in a big way. what we are trying to highlight is the business is different to the u.s. there is less subsidy and that seems to be a key part to the margin structure. they haven't gotten the same number of apple stores. if you look at the excitement in asia pacific it is around cheap

android phones. and we think that means the entire application market becomes very, very android centric. just as u.s. dominates the application environment here in the u.s. in asia we think android will be driving that. apple has the choice of becoming a niche plan. we suspect there will be margin compression. we are seeing this year will be pretty good still. early next year they have to start focusing on emerging markets may be the peak in profitability is behind them. >> what would you have to see to get apple to a buy for you. what would be the catalyst or the trigger if they did something? what would it be? >> the biggest thing would be if

the emerging carriers decided to subsidize in a really big way. a little bit half hearted. if we could see a lot more commitment to that and a lot of commitment to that kind of business model in india, indonesia and those markets i think we become more constructive on the name. at the moment it's hard to see how the operators can offer those subsidy policies for markets where the average revenue per userer is significantly lower than the u.s. the iphone is pretty hard to afford for the vast bulk of the emerging markets. >> we did want to congratulate you and your wife of the birth of your new twin girls. congratulations. very busy man. >> going to be exhausted. >> in terms of the apple break down you said you bought apple at 630.

>> i think the stock trading on pure emotion. if you can make a case that apple's margins are peaking you have a bear case. in between now and then which is the story telling i think you have a lot of emotion in the stock. this 50 day moving monkey thing gives emotion to buy the stock. somebody like me sees it intermediate trade. on the bounce maybe we sell it or we don't. >> alcoa used to be the bell weather market. apple is the new bell weather market in general. all the new products we are waiting for them to come out with, if they do it is dilutive. either way it looks like -- >> let me take issue with that. that is part of what has been the knock on google for six months. the move to mobile, the margins are going to be compressed. the overall margin, the absolute

dollars is bigger. to me the valuation should be bigger, as well. just because they are going from an absolutely spectacular margin. >> the real value investors who own the stock. you have value buys who are not looking for them to hit the numbers but see multiple expansion. if they can see peak upon peak i think you're right. >> it is margin dollars. if those continue to grow that is what happened in google. margin percentage would go down but the actual dollars grew and now the stock is as high as we have seen. it is sentiment in apple right now. >> netflix has been battered. now there could be another huge head wind for the company. the trade of the day sure to have you on a natural high. going to have to stick around to find out what is behind this

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than a half a billion dollars from wells fargo over alleged mortgage fraud. scott cohn is back at head quarters. >> you look at this case. both involving mortgage fraud and presidential task force. it is easy to conclude that the hammer is coming down on all big banks. here is a story on wells fargo. the largest originator of home mortgages it has the authority to certify its own loans. u.s. attorney says wells was misrepresenting the quality of the loans by the thousands during the housing boom. we got stuck with hundreds of millions of dollars in defaults. wells fargo denies the allegations as it plans to defend itself. where does this fit into the overall mortgage fraud crack

down. this investigation predates the mortgage fraud unit. this case comes from manhattan u.s. attorney's office. a lot of what is going on we are told is the typical rhythm of thing. cases tend to get wrapped up and charges are brought. while you can't look at this as a coordinated full frontal assault on the banks one source is telling me to expect a busy season for this type of thing. >> scott cohn thanks for that. it is funny because a lot of analysted are getting so bullish on the banks specifically that lend and issue mortgages. this would seem to put them in the target. >> it knocks the stuffing out of them. the financials have been the leader of this rally. you have headline risk in this sector. it will be tougher for these

things to make new highs. >> how much is the politics and how much will be settles as across the board a dollar amount. going to election year you will see that number, it could be a crazy large number and then cut in half and cut in half again. it will be settled and we'll go on about business as usual. >> this is why the stocks traded. regulatory issues are on going. it is politicized. both republicans and democrats can go hard on this. you have to get into the earnings season. you have loan growth. you have margin compression and capital markets and free fall. there is a lot going on. >> i want to draw your attention to the headline. cumins lowering the 2012 forecast. as a result of heightened uncertainty customers are

delaying. we lowered the forecast for several markets most significant in north america. demand in china has weakened. the company is saying it is taking action to cut costs which may include plant shut downs or work week reductions. they expect to reduce its workforce by between 1,000 and 1,500 people by the end of the year. >> a little bit of cheer for everybody in that. it lowered last quarter. the stock got crushed. >> and then it came out. >> they announced what they had preannounced and the stock rallied on that as the whole market rallied. this sounds to be a little worse than that. i have cumins. they tend to be cautious. there is a lot not to like. >> there is a lot of bad. >> this is a big level.

85 level obviously the level karen is talking about is 83 and change. twice before the bleeding stopped around the 85 level. see if it holds tomorrow. see if it is support or resistant tomorrow. >> what are you seeing? >> we highlighted in our morning meeting this morning that yesterday we were seeing something unusual. november 80 puts. i think this is interesting when we think about nav star because they have had seemingly ababsorbed as positive needs with respect to the engines. it is a fully priced stock. i'm not enthusiastic about the cmi. >> they are trading lower in the after hour session. >> they warned in the past, as well. >> to your point i would think there is little confidence in any management guidance given

the guidance they have given in the past two quarters. >> they lowered the guidance and came out with the same guidance, with what they had lowered to and the street read that as positive that it wasn't worse. they are getting a little bit of room. they like to sort of under promise and overdeliver. touched on a few things. mining is not great. trucks not great. >> china. >> china. >> it's a nice big package here. moving on to netflix taken heat as the business model, falling stock price and management decisions have come under scrutiny today getting battered by a downgrade at bank of america. what he calls the chanos rule. >> the chanos rule is this. when a company sells 25 to 30

million units the growth is either about to slow or stop all together. i first ran into this with jim chanos on the george foreman grill and then with leap frog with the leap pad. he used it on a company called coleco and the cabbage patch kids craze. 23 million streaming subs for a total of 30 million if you add in dvd. hbo, another company targeted using this peaked at 30 million subs. the question going forward, will the same happen at netflix? >> when you measure penetration for a company like netflix and for streaming, what is the pool and how do you get that percentage? >> everybody who has the capability and high speed internet and internet capable tv i'm trying to understand who we

see the potential audience as being to understand what full penetration is. >> full penetration tends to be with a paying sub. if hbo is the example you are at 30 million subs. this is a company getting closer to the 30 million. when it gets there will the growth slow? i talked to jim about this over the years on this very issue. it is almost flawless at least as a trigger point that investors must pay attention to. >> we just talked about apple and they are supposed to sell 50 million units this quarter. that seems like they are fairly vulnerable. you are looking at a company like apple. we are looking at areas where there are businesses. this is a situation on all of these other companies where you have hit a fad phase. you are looking at a company where there is an on slot of

competition. that is another factor. you have your exceptions to the rules. in the case of netflix to not consider this is fool hearted. you use hbo as the template. >> it is karen. if the chanos rule is triggered then what? >> then you start the slow down. >> where is it going? >> where is the stock going? you think i'm going to tell you where the stock is going? >> you gave the example of caleco going bankrupt. >> and then there is leap frog. you look what happened to the george foreman grill. you have to use it as a heads up and say it is where companies often will roll when there has been something very hot. look at green mountain with the keurig. it is a similar one. >> 30 million.

it hit that number? >> it's a great number to get. >> thank you for that. do you buy it? >> i think the best question is brian's question on apple. these numbers are big numbers. once you start to get to the fad side of it all it gets hairy. this stock is not held short. it's 1/3 of the stock. we can see this thing go away. >> let's take a check on shares of cummins. factory shut downs, etc. we see the stock down by about 5 1/3%. he was one of the first to call the housing bubble and now he is back with another big call. mark kiesel tells you what you need to know about playing the housing market right now. stick around.

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welcome back to "fast

money." the market peaked five years ago. mark kiesel called the housing crisis. today as the real estate market begins to improve he is here to tell us what happens next. you actually put your money where your mouth was. you sold your house in 2006 and became a renter. this spring you decided to reenter the housing market and bought a house. what has happened now that made you confident enough to do that with your own finances? >> a lot of it has been the work that my colleagues and i have been doing on housing. inventory six years ago were at record highs. the big change today is on the supply side vent inventories ar down. existing inventories at seven year lows. on the demand side you have a lot of pent up demand from

consumers and mortgage rates at 3.5% and investors coming in at cap rates of basically 6%. housing looks really cheap relative to most other assets. >> we have to understand the nuances of where the recovery is happening. when you take a look at the housing market where do you see the signs of improvement? what price range are we talking about or what markets? >> i think the best way is basically own the companies that are going to benefit from housing starts picking up. housing starts and permits right now are basically $750,0007750, basically you want to own the companies that are going to benefit from the housing recovery as homes get built. title insurance companies and building companies will be the

sectors to focus on. >> the market usually leads in issues like this. how do we know that the run in the stock specific, how do we know it is not priced in and we are looking for profits coming off the table with a lot of investors? >> it happened with the equity market. on the bonds side i think we are really only half way or less than half way through that. i will point to a company called ware houser bonds at 75% geared to housing. they have 6.4 million acres of timberlands. you are buying that company at trough earnings. those bonds in my opinion have high single digit return possibility given where they are traded right now. >> since you brought up bonds and you are the bubble guy, we have seen investors just kind of fall over themselves to buy corporate bonds. is that a bubble at this point

in time? >> there has been a lot of money moving into corporate bonds. it really highlights the benefits of active management. what our strategy has been is to own the companies and industries that are set to grow at two to three times the growth rate in the economy. those are the companies with credit momentum and likely to get upgraded. in addition to owning these housing recovery stories we are also owning pipelines, energy companies, chemical companies and gaming companies. these are sectors that will likely outgrow the growth rate and see positive credit momentum. those are the companies you want to still own. >> we have to leave it there. thanks so much for your time. we appreciate it. in terms of the trade you made a good point. you would not go into some of these names because you believe we have seen some sort of a run. >> we talked earlier today. if these stocks have been in favor a lot of these profits are

coming off the table. you have to look at the equities did lead. i don't know if there is a lot of bang for your buck. s&p has to be up another 3% for these to be rebought. >> after the move people started saying i have to buy the timberlands and banks. i hear it every other night. understand where you are which is we are long in the tooth. coming up next kelly joins us with a look at what is up next. >> we spent all day talking about risk management and goldman sachs. here is what you don't know. what are the external factors they are stress testing for today? we'll unveil that when we come back.

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all day kate kelly has been looking for ways to plan for risks. what happened in a dooms day scenario. more on wall street's game of risk. >> risk managers on wall street have spent the last four years improving technology in hopes of warding off future crisis. the thing worrying them today is the long list of factors that could put the tools to the test things like a war between israel and iran, a slow down in china. these are situations that could shock commodity markets or further depress job creation and growth. banks are stress testing nearly

every eventuality. morgan stanley alone conducts 10,000 informal risk simulations per week looking at various dooms day scenarios. some might have a stock market drop down of 20%. others a drop of 50. some of the big banks conduct stress tests of a dozen or more every week. this is mandated by the fed that they do it on a regular basis. regulators tell me the banks have improved their game since the crisis and dodd-frank will force them to continue. one way they sometimes fall short is by not properly accounting for their own mistakes. they assume that they handle it perfectly rather than maybe waiting too long to unload the position. >> the other question i would have is how many adverse events they test simalaltaneously. can they account for a fiscal

cliff plus a default of spain for instance? >> my sense is it varies from bank to bank. at jp morgan they will do ten dramatically different scenarios every two weeks. they assume a 10% drop in oil and the knock on effects from there. they take one thing with rippling effects. i'm sure they can tailor them accordingly. >> what was the biggest shock? we look at the scenarios did you ask what the biggest shock was? >> i will answer that question but bear in mind they are thinking outside the box. if someone is tuning in i don't want them to think chinese gdp has gone to 0%. the growth numbers are unreliable. banks are looking at really, really big slow downs in chinese growth whether 4% what have you

and what the effects would be. i talk to a lot of people about the eurozone crisis. that is old news. if you haven't had that baked into your positions for two years now you are behind the curve. slow downs in the bricks for sure. china is a big one. the israel iran thing is keeping people busy. and the fiscal cliff. political dysfunction in the u.s. has been a huge theme in recent years. the events triggered by inaction rather not renewal of the bush tax cuts or reduction in spending it is a variety of things. >> thanks for that fascinating report. when you stress test your portfolio what is a scenario that you are most concerned about? >> the scenario is about improving economic growth. that is the one thing that nobody is testing for. that is a risk. upside. absolutely. that is a risk. if it is a risk that you can test for and you know about it

how is it a risk? if there is a bubble out there in this market is the bubble that everything is going to fall apart. if every bank knows all the scenarios they should never lose money again. >> you ask about testing several things. what about when you throw in every bank going through the same crisis at the same time. >> if one bank has that problem -- >> i could never. coming up next one of our traders is going to fuel your portfolio. stick around for the trade of the day right after this break.

welcome back to fast. we are live in times square. we have an update on verifone. you have been short. >> i continue to be short. the reason it went down during the middle of the session is that there was a storyt that there was a grant of the taxi business in new york to square and then laterer it was heard

that that is not true. the taxi commission is doing a test for the taxi commission. currently another vendor has the business. verifone unhappy with that phone news. >> are you short using options or -- >> i have puts and stocks. >> you saw a lot of activity today. >> certainly in the early going today the most active option was the constitutional buyer. they paid $1.20 for those betting that the stock would be down. i think it is a good way to play it if you aren't expressing as much conviction as karen has been. there is a lot of head winds for the company and the reason people looking to options is because it was higher on the year.

there is good reason. >> it is time now. >> my time to shine. the trade of the day today is natural gas. you can buy it via ung. the bearish case for natural gas is shale drilling has caused an oversupply. back in april we had a lot of change in the utilities. not only that you are starting to see the filling of the supply area be at pace for what they were talking about. people were talking about we might have free gas people were going to be giving away. that never happens in a capitalist society. i think it has room to run. you look at natural gas futures i would say that is where you start to get the supply response. this coal to gas shift a lot of it is of a permanent nature. you probably have a decent demnd.

>> why would we have a permanent nature? analysts are talking about with spot gas there is a switch going on back. >> not to the extechbt it was when you had the first goal to gas switching. there may be some utilities that can do that quickly. >> stay tuned. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade.

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coming up next hour on mad money nbc's healthy week continues. cramerer is adding two more stocks to his hot list. he is checking oil primed to go higher. time for the final chair. >> netflix premiums are elevated here. you have to be considering selling upside calls. >> clf, a play on the massive move we have seen in iron ore. >> apple. people are freaking out. you buy it and until proven wrong you do it again and again. >> actually i am following keith. i'm going with ape,